The ties that bind: HNA's Chen Feng and his rise to power

May 22, 2017 10:03
Chen Feng (inset, left) turned a tiny airline into a global behemoth. The low-key tycoon is now in the media glare thanks to his son's high-flying lifestyle and recent revelations of his ties with top party cadres. Photos: Weibo, liuqianlv, HNA

HNA Group, parent of the Chinese carrier Hainan Airlines, had kept a low profile until the end of last year, when the conglomerate must have realized that given its size and sway, media scrutiny was a cross it had to bear.

The group has been thrown into the spotlight since it launched a buying spree of pricey overseas assets. In a span of four months since last November, its subsidiaries paid HK$27 billion (US$3.47 billion) to acquire four prime lots at Kai Tak, the site of Hong Kong’s former airport, and before that splurged US$6.5 billion for a 25 percent stake in Hilton Worldwide Holdings.

Recently HNA showed a strong appetite for foreign exchange and investment banks, with its latest target being Deutsche Bank. The Chinese behemoth has thrown a lifeline to the debt-laden German lender by investing 700 million euros (US$777 million) to become its largest stakeholder, a move some analysts described as “prodigal”.

Rumor also has it that HNA is offering US$400 million to buy out Forbes after the US business magazine elated the management with a highly positive feature about the conglomerate in its March issue.

Yet not all the media focus is to the group's liking.

For example, questions are starting to crop up as to how HNA managed to circumvent Beijing’s closing the floodgates for capital outflows and move about US$40 billion overseas.

The plot thickens with some rather theatrical exposés by an exiled Chinese tycoon, Guo Wengui, who acted as a procurator for prominent Communist cadres but made a beeline for the United States when his political allies lost out to rivals in the party’s factional schism.

Guo said in a Voice of America interview in April, whose broadcast was abruptly cut short, that Communist Party General Secretary Xi Jinping is probing the wheeling and dealing between HNA and Wang Qishan, No. 5 in the party hierarchy and the Chinese leader's chief henchman in his anti-corruption drive.

While Wang crafts his image as a graft-busting tsar, his wife and nephew possess substantial HNA shares, and oiled the group's numerous takeovers at home and abroad, even after Beijing began to stem capital flight, alleged Guo, who is now on China’s most wanted list.

Guo’s revelations have been demurred by some for the lack of evidence, but even official CVs and files point to Wang’s decades-long ties with HNA, in particular its founder, Chen Feng (陳峰), who is conspicuously low key compared to other mainland tycoons and given the sheer dimensions of his empire.

Pull from the top

Open archives show that Chen, a former People's Liberation Army pilot, first met Wang in 1988 while working for a project of China Agriculture Trust Investment Co., of which Wang was then the general manager.

A year later Chen, with a career history in the Civil Aviation Administration, moved to the southern island of Hainan, an economic backwater encumbered by poor transport, and founded Hainan Airlines with a lump sum injection of 10 million yuan from the local government.

In its initial years the fledging carrier was a low-flying laggard with just a handful of narrow-body planes leased from other firms, and at times Chen had to mortgage planes to secure loans, including those from the Hainan branch of China Construction Bank, which by then was led by Wang. The real lift came when Wang became Hainan’s party chief in 2002.

Preferential treatment for local enterprises is commonplace in China, and Hainan Airlines, later known as HNA, started to take flight under Wang’s watch. The government’s nod for the firm’s trial for joint-stock, private ownership, the first in the nation’s aviation sector, also quenched its thirst for capital.

New heights

The firm began to spread its wings in 2000s, when small planes like Boeing 737 could no longer accommodate its rapid passenger growth amid a travel boom.

In 2005 HNA ordered eight two-aisle 787 Dreamliners worth no less than US$200 million each. It swiftly replenished its fleet with big jets such as Airbus A330, Boeing 767 and 787, and expanded to 171 routes to 90 cities.

In the same year HNA inked a deal to acquire controlling stakes at CR Airways and renamed it Hongkong Airlines. The airline now flies to 36 cities in the Asia-Pacific as well as in North America.

Budget carrier HK Express was another milestone as HNA sought to tap the region’s booming non-frills market. The nimble unit took only three years to break even and is now keen to further expand its network.

Back home, HNA has over the years brought several smaller, regional carriers under its umbrella, and founded with local authorities a dozen more, with a combined fleet of 1,250 planes, dwarfing those of Air China, China Southern and other state firms. By comparison, Cathay Pacific and its subsidiary Cathay Dragon have 189 planes in total.

With business encompassing aviation, property, hotel, logistics, retail and finance, HNA reported a revenue of 600 billion yuan last year, putting it on the 353rd spot in the Fortune Global 500, ahead of Air France-KLM and Emirates, leapfrogging 111 places from a year earlier. The HNA family has eight A-share-listed firms and three stocks trading in Hong Kong.

Big yet obscure

But Chen, who has been at the helm of the juggernaut, remains largely invisible. Media requests for an interview are not entertained, and the group once reportedly demanded that Wikipedia delete an entry about its founder.

While other business titans of comparable heft like Alibaba’s Jack Ma and Wanda’s Wang Jianlin get superstar-like cult following nowadays, the public know little about Chen, other than that he is a devout Buddhist and an amateur calligrapher.

What is equally obscure is HNA’s ownership structure that consists of layers of shells and offshore entities as well as rumored stakes owned by party princelings, including the family of Wang Qishan.

Chen is quoted as saying that no one can understand HNA. But what Chen is not shy about is HNA’s ambition to soar even higher and join the top 10 league of Fortune Global 500 in the next decade, as he told Xinhua during a party plenum.

Among Chen’s very few public appearances was the one in 2015, when he took the same stage with Xi and former British Prime Minister David Cameron at the launching ceremony of HNA's direct flights between Beijing and Manchester, one of the highlights of the Chinese leader's state visit to the United Kingdom.

The son also rises

Still, the high-flying lifestyle of Chen’s younger son, Chen Chao, and his association with top-tier mainland actresses and models have been grist for China's rumor mill.

The younger Chen, a US citizen, once worked at the Hong Kong offices of Morgan Stanley, Credit Suisse and Deutsche Bank and likes to post on his Weibo account photos of his golf parties, yachts, and other escapades.

Most recently, he amused his fans with images of a US$325 million Boeing 787 that can fly over 300 passengers in commercial configuration but has become his private jet with a round foyer, a cavernous main lounge and an airy master suite – yes, just for him and 40 of his similarly silver-spooned friends to travel on in style.

Meanwhile, Chinese censors quickly removed most of the reports hinting at HNA’s ties with party heavyweights, and, earlier this month, or soon after Guo’s bombshell, Chen Feng showed up at Peking University in Beijing and wrote a cheque for 150 million yuan as a donation.

The media saw him again last Tuesday at a social event that he used to shun: he was appointed “Advocate of Overseas Sustainable Development of Chinese Enterprises” by the Beijing office of the United Nations Development Programme.

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Planes belonging to HNA Group can be seen in all major airports across the Asia Pacific, North America and Europe. Photo: sqshane/
Chinese President Xi Jinping (center) and former British Prime Minister David Cameron (2nd, right) with Chen Feng (2nd, left) and other officials at the launch of HNA's direct flights between Beijing and Manchester. Photo: HNA
File photo of Chen Feng at the inauguration of Hongkong Airlines' Airbus A330 wide-body fleet. The HNA-owned local carrier celebrated its 10th anniversary last year. Photo: HKEJ
Hong Kong Express, HNA's budget unit, is among the region's fastest-growing airlines. It took merely three years for it to break even as it dominated short routes to tourist hotpots in Japan, Taiwan and Southeast Asia. Photo: HK Express
HNA has splurged some US$325 million for the world's first private jet version of Boeing 787, which features spacious living rooms, a bar and a master suite. Photo: HNA
HNA's headquarters complex in Haikou, capital city of Hainan province. Photo: HNA

EJ Insight writer